Economy
Fitch Downgrades Nigeria to ‘B’ on Weak Fiscal Buffers
By Dipo Olowookere
Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) has been downgraded to ‘B’ from ‘B+ by Fitch Ratings, with the outlook negative.
In a statement issued on Monday, Fitch noted that the lowering of the rating was due to the pressures on the country’s external finances caused by crash in the prices of crude oil at the global market by coronavirus pandemic.
The Brent crude, under which Nigeria’s oil is priced, sold around $23 per barrel some weeks ago and only last week hit just over $30 when news hit town that Saudi and Russia will likely have discussions about the market situation.
Nigeria depends largely on crude oil sales for external revenue and according to Fitch, the intensifying external pressures raise risks of disruptive macroeconomic adjustment given the country’s “precarious monetary and exchange rate policy setting and lack of fiscal buffers.”
It said the shock will also raise government debt and interest payment-to-revenue ratios from already particularly high levels and lead to a renewed economic recession.
Fitch said the shock will worsen the overvaluation of the Naira and remedial policy actions taken by the Central Bank of Nigeria (CBN), which it stressed will not “suffice to address deteriorating external imbalances.”
The CBN allowed the exchange rate on the Investor and Exporter Window, on which the bulk of foreign-currency (FC) transactions is held, to depreciate by 6.7 percent since mid-January and devalued the official exchange rate by 15 percent in March, the rating agency stated.
According to Fitch, Nigeria’s vulnerability to short-term capital outflows is high given the sizeable stock of portfolio investments in short-term Naira debt securities, equivalent to $27.7 billion (6.9 percent of GDP) at end-2019 and representing around 72 percent of FC reserves at the time.
“Of these liabilities, $14.7 billion was in non-resident investments in the CBN’s open-market operation bills that were attracted by high interest rates and hedging instruments offered to non-residents at non-economic costs under the CBN’s policy of stabilising the exchange rate.
“Continued reluctance to adjust the exchange rate, portfolio outflows and a wide current-account deficit (CAD) will lead FC reserves to fall to 2.5 months of current account payments at end-2020 under our forecasts, well below the historical ‘B’ median of 3.8 months, and their lowest level since 1994.
“We estimate that the CAD will widen to a record level of 4.9 percent of GDP in 2020, exceeding the historical ‘B’ median of 4.3%, under our assumption of only modest depreciation of the Naira.
“Nigeria’s long-standing current account surplus shifted to a deficit of 4.2 percent of GDP in 2019 on an upsurge in imports, chiefly of equipment goods.
“We project the CAD to narrow to 1.8 percent in 2021 reflecting partial recovery of oil prices to $45/b, import compression and tighter restrictions on FC access,” the agency said.
It further said the country’s external finances are highly vulnerable to a further fall in international oil prices below the current forecasts of about $34/b.
It noted that despite the expiry of production caps under the OPEC+ agreement, there is little scope to ramp up Nigeria’s oil production beyond the current assumption of 2.1 mbpd given capacity constraints and the build-up of a global supply glut on oil markets.
“Under a stable oil production assumption, a $10 drop in average Brent benchmark prices below our current projection would cause the CAD to widen by an additional 1.6 percent of GDP.
“Furthermore, the domestic oil sector’s operational breakeven is around $25-30/barrel, based on official estimates, meaning production cuts are likely should oil prices continue to hover well below $30/barrel,” it said.
Fitch further said the collapse in oil revenues and the slowdown in economic activity will take a toll on the government’s already weak fiscal revenues.
“This will be partly cushioned by the devaluation of the official exchange rate, which will boost fiscal oil revenues in Naira terms.
“In addition, the fall in international fuel prices will allow the government to eliminate the implicit fuel subsidy. Nigeria’s fiscal breakeven oil price is high, at $133/barrel under our estimates, given particularly low non-oil fiscal intakes.
“We project the general government (GG) deficit will widen to 5.8 percent of GDP (federal government, FGN: 3.1 percent) in 2020 from 3.8 percent (FGN: 2.4 percent) in 2019.
“There is limited scope for consolidation through spending cuts given fiscal rigidity from payroll and interest outlays, which will represent 150 percent of the FGN’s revenues and two-thirds of its expenditures in 2020. Cuts to other operational outlays and capital expenditures will be largely offset by higher spending on health services and support to sectors affected by the pandemic shock,” it stated.
By Adedapo Adesanya
The United Kingdom via the British High Commission in Abuja has launched two flagship economic reform programmes – the Nigeria Economic Stability & Transformation (NEST) programme and the Nigeria Public Finance Facility (NPFF) -as part of efforts to support Nigeria’s economic reform and growth agenda.
Backed by a £12.4 million UK investment, NEST and NPFF sit at the centre of the UK-Nigeria mutual growth partnership and support Nigeria’s efforts to strengthen macroeconomic stability, improve fiscal resilience, and create a more competitive environment for investment and private-sector growth.
Speaking at the launch, Cynthia Rowe, Head of Development Cooperation at the British High Commission in Abuja, said, “These two programmes sit at the heart of our economic development cooperation with Nigeria. They reflect a shared commitment to strengthening the fundamentals that matter most for our stability, confidence, and long-term growth.”
The launch followed the inaugural meeting of the Joint UK-Nigeria Steering Committee, which endorsed the approach of both programmes and confirmed strong alignment between the UK and Nigeria on priority areas for delivery.
Representing the Government of Nigeria, Special Adviser to the President of Nigeria on Finance and the Economy, Mrs Sanyade Okoli, welcomed the collaboration, touting it as crucial to current, critical reforms.
“We welcome the United Kingdom’s support through these new programmes as a strong demonstration of our shared commitment to Nigeria’s economic stability and long-term prosperity. At a time when we are implementing critical reforms to strengthen fiscal resilience, improve macroeconomic stability, and unlock inclusive growth, this partnership will provide valuable technical support. Together, we are laying the foundation for a more resilient economy that delivers sustainable development and improved livelihoods for all Nigerians.”
On his part, Mr Jonny Baxter, British Deputy High Commissioner in Lagos, highlighted the significance of the programmes within the wider UK-Nigeria mutual growth partnership.
“NEST and NPFF are central to our shared approach to strengthening the foundations that underpin long-term economic prosperity. They sit firmly within the UK-Nigeria mutual growth partnership.”
By Aduragbemi Omiyale
A strategic partnership aimed at accelerating the growth, digital capacity, and sustainability of Nigeria’s 40 million Micro, Small and Medium Enterprises (MSMEs) has been signed by MTN Nigeria and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
The collaboration will feature joint initiatives focused on digital inclusion, financial access, capacity building, and providing verified information for MSMEs.
With millions of small businesses depending on accurate guidance and easy-to-access support, MTN and SMEDAN say their shared platform will address gaps in communication, misinformation, and access to opportunities.
At the formal signing of the Memorandum of Understanding (MoU) on Thursday, November 27, 2025, in Lagos, the stage was set for the immediate roll-out of tools, content, and resources that will support MSMEs nationwide.
The chief operating officer of MTN Nigeria, Mr Ayham Moussa, reiterated the company’s commitment to supporting Nigeria’s economic development, stating that MSMEs are the lifeline of Nigeria’s economy.
“SMEs are the backbone of the economy and the backbone of employment in Nigeria. We are delighted to power SMEDAN’s platform and provide tools that help MSMEs reach customers, obtain funding, and access wider markets. This collaboration serves both our business and social development objectives,” he stated.
Also, the Chief Enterprise Business Officer of MTN Nigeria, Ms Lynda Saint-Nwafor, described the MoU as a tool to “meet SMEs at the point of their needs,” noting that nano, micro, small, and medium businesses each require different resources to scale.
“Some SMEs need guidance, some need resources; others need opportunities or workforce support. This platform allows them to access whatever they need. We are committed to identifying opportunities across financial inclusion, digital inclusion, and capacity building that help SMEs to scale,” she noted.
Also commenting, the Director General of SMEDAN, Mr Charles Odii, emphasised the significance of the collaboration, noting that the agency cannot meet its mandate without leveraging technology and private-sector expertise.
“We have approximately 40 million MSMEs in Nigeria, and only about 400 SMEDAN staff. We cannot fulfil our mandate without technology, data, and strong partners.
“MTN already has the infrastructure and tools to support MSMEs from payments to identity, hosting, learning, and more. With this partnership, we are confident we can achieve in a short time what would have taken years,” he disclosed.
Mr Odii highlighted that the SMEDAN-MTN collaboration would support businesses across their growth needs, guided by their four-point GROW model – Guidance, Resources, Opportunities, and Workforce Development.
He added that SMEDAN has already created over 100,000 jobs within its two-year administration and expects the partnership to significantly boost job creation, business expansion, and nationwide enterprise modernisation.
By Adedapo Adesanya
The Nigerian Exchange (NGX) Limited is seeking review of the controversial Capital Gains Tax increase, fearing it will chase away foreign investors from the country’s capital market.
Nigeria’s new tax regime, which takes effect from January 1, 2026, represents one of the most significant changes to Nigeria’s tax system in recent years.
Under the new rules, the flat 10 per cent Capital Gains Tax rate has been replaced by progressive income tax rates ranging from zero to 30 per cent, depending on an investor’s overall income or profit level while large corporate investors will see the top rate reduced to 25 per cent as part of a wider corporate tax reform.
The chief executive of NGX, Mr Jude Chiemeka, said in a Bloomberg interview in Kigali, Rwanda that there should be a “removal of the capital gains tax completely, or perhaps deferring it for five years.”
According to him, Nigeria, having a higher Capital Gains Tax, will make investors redirect asset allocation to frontier markets and “countries that have less tax.”
“From a capital flow perspective, we should be concerned because all these international portfolio managers that invest across frontier markets will certainly go to where the cost of investing is not so burdensome,” the CEO said, as per Bloomberg. “That is really the angle one will look at it from.”
Meanwhile, the policy has been defended by the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, who noted that the new tax will make investing in the capital market more attractive by reducing risks, promoting fairness, and simplifying compliance.
He noted that the framework allows investors to deduct legitimate costs such as brokerage fees, regulatory charges, realised capital losses, margin interest, and foreign exchange losses directly tied to investments, thereby ensuring that they are not taxed when operating at a loss.
Mr Oyedele also said the reforms introduced a more inclusive approach to taxation by exempting several categories of investors and transactions.
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